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Saving Thousands Beneath the Blue Suburban Skies

Jason and Jennifer, a young couple who had been renting, were now ready to purchase their first home. Their budget was under $410,000, and their agent showed them a house at 2 Penny Lane that they really liked, with an asking price of $400,000. Now Jason and Jennifer were tough negotiators, and knew that many houses sell for less than asking price, so they offered $395,000—willing to come up to $397,000—so they could save thousands.

Another young couple who were renting, Sam and Cara, had the same budget, and their agent showed them a house they really liked. They offered $400,000 for the house at… 2 Penny Lane.

The terms of the two couples’ offers were the same—both qualified for conventional loans with 10% down—except Sam and Cara had offered $5000 more, so the seller sold the house to them. Jason and Jennifer kept looking for the next three months, while real estate prices increased 1%, but they didn’t find a house they liked as much as 2 Penny Lane—until one day they saw the house at 1 Pound Street, which was nearly identical and just as nice. With an asking price of $404,000, they made a full price offer and bought the house.

Compared to what Sam and Cara had paid, Jason and Jennifer, trying to save $3,000-$5,000 (just $300-$500 in cash) not only had spent $4,000 more, but lost the $4,000 in appreciation that Sam and Cara added to their net worth. Sam and Cara saved hundreds more in interest tax deductions, all while not paying an extra three month’s rent.

There are no sure things in real estate, and two couple’s experiences might have turned out quite different, so the moral is:

A Penny Saved is a Penny Earned, But Don’t Be Penny Wise and Pound Foolish.

P.S. Do you hear the Beatles’ “Penny Lane” in your head now? What’s not to like?